cannot access destop and startmenu stuff

cannot access anything on the desktop by double clicking.
cannot access anything on the desktop by right clicking and select open.
cannot access anything ong the desktop by selecting an icon and hitting enter.
cannot access anything through the start menu.

can run things if I go through the run command to do it.
can access things in task menu tray.

any ideas to why this would be happening would be greatly appreciated.

Sure that the Recovery CD is not scratched, dirty or otherwise damaged? That doesn't make a lot of sense, really. Even if the hard drive has been changed and more RAM installed the Recovery should still work OK.

Have any optical drives been added since the system was new? Add-in cards installed? Try disconnecting any such additions and redoing the Recovery?